Will relationship building cost newspapers too much?

The New York Times is giving pay wall skeptics reason to reconsider their skepticism. Despite questions about the company's paywall strategy, the daily has managed to lure some 325,000 paying subscribers.

That's good news for a newspaper that some believed might not survive.

But the news isn't all good. Print revenue is down, and the new revenue from the Times' paywall isn't great enough to offset the decline. Add to that the decline of one of the company's key online properties, About.com, due to Google Panda, and you have a picture that isn't nearly as bright as the paywall figures alone would make it seem.

So what should The New York Times do?

One of the things GigaOm's Mathew Ingram thinks Times execs should start looking at is "reverse paywalls." He explains:

The main principle behind this idea is that regular readers should get more than just a sales rep hitting them up for a monthly payment — the fact that they are a devoted fan should entitle them to earn rewards, whether it’s money off their subscription for interacting with the paper, or offers that others don’t get.

He goes on:

The NYT has taken a few steps towards trying to build relationships with its readers through what I’ve called the “levelling up” process that it recently added to its comment section, where readers can achieve preferred status for good behavior. Those are the building blocks of a relationship that the paper could use to its own benefit in all kinds of ways, many of which could generate new sources of revenue — real-life events, for example, which has been one of the things that has helped turn The Atlantic around, or a line of e-books based on the newspaper’s original reporting.

In theory, this sounds promising. After all, in a world where news content is increasingly commoditized, finding ways to build closer relationships with readers would seem to be necessary. But can the efforts to do that really bear fruit in the form of increased revenue?

Producing high-quality events can be costly, and an events business is often difficult to scale. There's definitely room for ebook singles, but there's no evidence that ebook singles are going to produce anything more than ancillary (read: modest) revenue. And it's hard to see how giving discounts to the most active of readers is going to keep newspapers out of Groupon-land.

In short, there are no golden arrows here. Finding ways to reward loyal readers with access to new offerings is a good idea, but the idea that asking someone to pay for your content is somehow penalizing them is naive.

Relationships will matter more and more to newspapers in the future, but newspaper executives shouldn't delude themselves: the biggest problems for companies like The New York Times are on the cost side, not the revenue side. Ignoring the former and focusing too much on the latter could prove fatal.

Comments (1)

It may cost a lot to build relationships but without a strategy in place and some heavy investment in the next couple of years, newspapers may find themselves all together left behind as social media and the internet begin to give people the news they want to read.

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